Byju’s Files Lawsuit Against Redwood Alleging Predatory Tactics In Term Loan Acceleration

Indian edtech startup Byju’s has filed a lawsuit against investment management firm Redwood in New York Supreme Court to contest the acceleration of a $1.2 billion term loan B (TLB) facility and disqualify the lender for its ‘predatory tactics’, according to an official announcement by the company.

In the statement, Byju’s argued that Redwood purchased a major chunk of the loan while predominantly trading in distressed debt, which violated the terms of the term loan facility. Reportedly, the edtech unicorn also issued a notice to Redwood entities disqualifying the investment firm as a lender with critical rights under the term loan norms once it takes effect.

The company further said that on 3 March 2023, the TLB lenders unlawfully accelerated the TLB on account of certain alleged non-monetary and technical defaults. On the back of this unconscionable acceleration of the TLB, the TLB lenders undertook unwarranted enforcement measures including seizing control of BYJU’S Alpha and appointing its own management.

“Not resting content with this, the TLB lenders (acting through their agent, GLAS Trust Company) commenced litigation in Delaware in an attempt to lend credence to these actions. In the Delaware proceedings, the TLB lenders (unsuccessfully) attempted to deprive BYJU’S of its contractual right to ‘disqualify’ lenders engaged primarily in opportunistic trades,” BYJU’S added.

In addition to the TLB lenders, Redwood, a lender with a reputation for dealing in distressed debt, is the target of BYJU’s complaints. In an effort to take advantage of the situation, Redwood has been steadily increasing its holdings in the TLB. BYJU’S stated that it had disqualified the Redwood entities and that this would limit their ability to exercise important TLB rights.

Moreover, BYJU’S has stopped paying additional payments, including interest payments, towards its Term Loan B, claiming that the loan has been contested as a result of continuing legal procedures. It also clarified that the company has chosen not to make further payment to the term B loan providers, including any interest, until the dispute is decided by the court.